At a historic property downtown, a tug of war over vacation rentals

Aug. 8—When Bob and Cindy Magie purchased a historic property near downtown in 2015 from the Lower Columbia Preservation Society, their goal was to restore and rent out the buildings.

Using 20 years of retirement savings as the down payment, the couple said they brought the two cottages and fourplex on Exchange Street, known as the Gilbaugh Apartments, back from the edge of falling apart.

Over time, the long-term housing transitioned into vacation rentals.

Earlier this year, after seeing a listing online, the city sent the Magies a letter notifying them that using the apartments for vacation rentals was in violation of the city's homestay lodging ordinance. The city ordered the couple to stop.

But the situation remains unclear.

The Magies maintain that the vacation rentals are legal and that the city has been inconsistent in communication. The city is still looking at the facts to determine whether the business is operating legally, but is also concerned about the loss of residential housing units.

Having purchased the property with the intent of converting all the units into vacation rentals and already investing a significant amount of money into the restoration, the Magies are frustrated.

"This is not fair and feels like theft," the couple said in an email.

'Fairly complicated'

Astoria adopted a homestay lodging ordinance in 2018 that does not allow rooms to be rented as vacation rentals unless the owner lives on the property and obtains a license. The ordinance grew out of concerns about illegal short-term rentals and the market forces putting the city at risk of losing more of its limited housing stock to tourism.

Although the Magies property is in a commercial zone that allows hotels, the ordinance prevents structures occupied as residential housing after January 2019 from being used for vacation rentals. Structures that were originally constructed as residential housing also cannot be used for vacation rentals.

In the letter sent to the Magies earlier this year, the city said the fourplex was originally constructed as residential housing and has been consistently used to house people.

The Magies claim they purchased the property and began converting the units to vacation rentals before the city restricted that option, giving rise to a vested right to continue.

City Attorney Blair Henningsgaard said the city has not agreed with that assessment.

"The facts are fairly complicated and the parties have been exchanging information," he said in an email.

Henningsgaard said the city is still trying to determine when each of the units started being used as vacation rentals. "Unfortunately, our code does not provide a clear procedure for us to follow," he said.

The city may hold an evidentiary hearing at the Planning Commission and the issue could wind up before the City Council.

The Magies say that communication from the city has been inconsistent, including an email in 2020 which the couple interpreted as approval to convert all the units to vacation rentals.

"It feels every time there is a staff change at the city we have to revisit all of this again (with great stress) and now that we have invested so much time, money and effort, the city has now threatened to pull the rug out from underneath us after accumulating all this debt," the couple said.

The Magies requested approval of their development as a lawful nonconforming use in May.

In the application, the couple said their intention has always been to transition the units into vacation rentals. The process started with the first cottage, they said, which was converted into a vacation rental under the business name, Astoria Downtown Cottages.

Over time, the other cottage and three units in the fourplex were also turned into vacation rentals.

The application included letters from Shannon Fitzpatrick, who owns Pacific Capital Management, and his brother, Sean Fitzpatrick, who owns Wecoma Partners, affirming the Magies' original intentions.

Pacific Capital Management managed the property from May 2018 through November while the couple was attending to other business and family matters, Shannon Fitzpatrick noted in his letter.

"We worked together on upgrading and updating units in a manner that would set the units up for use as future short-term rentals as tenants vacated the units and new tenants were put into place," he wrote.

"As you and your family were winding down your other business and family matters and starting to take over more management and upgrades at the property, we started to slowly transition the units, one at a time, to short-term rentals."

Sean Fitzpatrick, who serves on the Planning Commission and is running for mayor in November, advised the Magies as part of his role as an adviser with the Clatsop Small Business Development Center.

In his email, he noted that the high costs associated with restoring the buildings were beyond what fair market rents could support. "As a result, you would have to utilize the commercial zoning to create cash flows that could support the restoration, repairs and ongoing maintenance, which meant short-term rentals," Fitzpatrick said.

He added that after significant investment, the buildings are safer and look better. "A great contribution to the neighborhood as it transitions from housing to commercial," he said.

The Magies told The Astorian that they specifically searched for property with commercial zoning downtown to allow the flexibility to have vacation rentals.

They said the operation provides a full-time salary for their manager, part-time income for multiple cleaners, generates lodging tax revenue for the city and county and brings tourism dollars downtown.

"We love our town, we love the historic architecture here, we live here and are raising our family here, we work here, we provide quality long-term housing here and have spent everything we have to restore an historic property downtown and we feel we are now, at the 11th hour, being scolded for that effort," the Magies said. "We put our heart and soul and much blood sweat and tears to bring this property back from the edge of falling apart.

"If we knew the city would change its mind after we'd invested so much, we would not have bought this property or done any of the restoration. Furthermore, we had no idea that the city could come and try to take our outright use away — three years after the limitations on STRs took effect, after spending so much on these buildings and getting all required approvals to operate them as short-term rentals.

"This is very discouraging to developers and housing providers and ultimately has and will continue to reduce investment in our community as we know of investors and builders that will no longer do work in Astoria due to similar difficulty with the city."

'It no longer felt like a home'

Austin Kettleson, a small-business owner and a veteran of the U.S. Coast Guard, has lived in a unit in the fourplex for over three years with his girlfriend and her two daughters, ages 9 and 6.

Kettleson has watched tourists replace his neighbors as the units around him became vacation rentals. Eventually, his unit was the last long-term rental left.

So it wasn't unexpected when Kettleson received a termination notice in May.

"It no longer felt like a home ... ," he said. "You don't feel like decorating or anything."

Although the 90-day notice said his apartment would be used to house one of the owners' family members, Kettleson expects it will eventually turn into a vacation rental like the rest of the units.

In a statement to The Astorian, the Magies said they provided one month's rent to Kettleson as required under Oregon law. They said they offered an alternative unit at another location, but Kettleson said he declined because it was more expensive, had less square footage and was on the other side of town.

While the couple and the city work toward a conclusion, Kettleson has been working overtime to close on a house.

He feels lucky that his family is fortunate enough to make that move. "But there's so many people that can't swing that," he said.

Over the past three years, he has watched the number of vacation rentals tick up on the Airbnb website while workforce and affordable housing in Astoria remains scarce.

Kettleson worries about the message that will be sent to other apartment owners if the Magies are able to turn all six units into vacation rentals.

"I think it's only a matter of time before owners of those buildings say, 'Well, these people did it with theirs, why can't I do it with mine?' and just start doing it the same," he said.